Issue Brief #144

In April, the Department of Commerce released a large study purporting to detail the economic benefits each state will receive if the U.S. grants Permanent Normal Trade Relations (PNTR) to China. These so-called “opportunity reports” reveal the utter lack of substance behind the claims of economic benefits accruing to the U.S. from more open trade with China.

Members of Congress who use these reports to defend a vote for PNTR will wind up with little to say to workers who lose their jobs because of China’s growing exports.

The Commerce Department’s state-by-state prospectus:

completely overlooks the impact of imports from China on U.S. employment, despite a $70 billion trade deficit;

tells almost exactly the same story for all 50 states;

egregiously exaggerates the importance of exports to China for U.S. small business.

Half the story…
Trade, of course, means imports as well as exports, but in the case of China it means a lot more imports than exports: U.S. imports from China exceeded exports to China by almost $70 billion in 1999, translating into a loss of 900,000 jobs in industries producing tradable goods. The Administration’s own International Trade Commission says the deficit will continue to grow.

This unbalanced trade with China now accounts for 20% of the total U.S. trade deficit, which reached $340 billion in 1999. And the new China-U.S. trade pact would balloon the trade deficit by encouraging even more investment in China by U.S. corporations exporting back to America.

No numbers…
The Commerce Department claims its 50 state reports “go beyond traditional static analysis of a state’s trade with China.” In fact, the reports go beyond traditional statistical analysis. They offer no statistics at all about how much they predict exports to China will increase – state-by-state or even nationally. Instead, we have “State Export Profiles”: a few scant paragraphs of basic information, such as how much the state exports to China and where China ranks among the state’s major export destinations.

These are followed by “Sector Snapshots,” which supposedly tell how the leading industries in each state will benefit from more trade with China. But the “snapshots” are, with only a few exceptions, virtually the same for every state. The same paragraphs appear over and over again. How interesting that the U.S. Commerce Department seems to believe that the economies of California and Massachusetts are pretty much the same, and that no business in either state competes with Chinese imports.

Moreover, the study’s overview wildly distorts what constitutes a benefit for the ordinary worker. For instance, it touts the potential for a “huge reduction in paperwork costs,” and explains that, under the trade agreement, China will allow foreign banks to practice “local currency banking,” loosen its restrictions on foreign life insurers, and end the practice of allowing “foreign securities firms” to trade in only “a limited number of stocks.” Great news for Wall Street high rollers, but what do Chinese and American workers have to celebrate?

…and a non-sequitur
Finally, the reports hype anecdotes about how “small and medium-sized (SME) local companies” will benefit from more trade with China.

But fewer than 1% of America’s 24 million small businesses export any goods anywhere – much less to China. And the report doesn’t mention that U.S. multinationals investing in China send their products back to the United States, wiping out small firms in every state.

In a typical story, we learn that Technical Sourcing International (TSI) of Montana, a manufacturer of chemical equipment and supplies, employs 12 people in that state. But its subsidiary “has three sales offices and 70 employees in China.” This is a great deal for U.S. workers?

If the benefits the U.S. will receive from liberalized China trade are the sum of its 50 parts, then these opportunity reports might more appropriately be called “lost opportunity” reports. At best, the compilation is vague and uninformative; at worst, it is misleading and deceptive, presented as if it were a piece of careful scientific documentation rather than a compilation of nearly useless facts, cut and pasted into a preformatted template. Administration officials say the question of increased trade with China is a “no-brainer.” This report demonstrates that they take that expression literally.

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EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. EPI’s research helps policymakers, opinion leaders, advocates, journalists, and the public understand the bread-and-butter issues affecting ordinary Americans.